Top 5 Blog Entries of the Libertarian Jew for 2020

2020 has been a crazy year. We had the worst pandemic since the Spanish Flu. We are experiencing the worst economic downturn since the Great Depression. Social unrest and political polarization have not been this tumultuous since "who knows when." The U.S. presidential elections were an absolute circus. In future years, 2020 is going to be the year we would like to forget, but we will end up remembering not-so-fondly. As I look back on the year, I look at the good, bad, and the ugly in my personal life. I also look back at my blogging for 2020. Here are five of my favorites: 

1. Cancel Culture and J.K. Rowling's Remarks About Transgenderism & Biological Sex. How do we deal with people whose viewpoints or opinions we find disagreeable? I explored this question after J.K. Rowling made comments that "sex is real," a comment that resulted in accusing Rowling of transphobia. After providing nuance in the world of transgenderism, I segue over to criticizing cancel culture and how cancel culture is toxic for society as a whole. 

2. Why We Need to Start Lifting Coronavirus Lockdowns Sooner Rather Than Later. About a month-and-a-half after the lockdowns commenced in March, I got fed up enough where I decided to write a list of thirteen reasons and considerations for why we needed to gradually lift restrictions. In early May when I wrote this, I called for a balanced approach and using standard risk management to figure out how the best way to navigate the pandemic. It's sad to see how much fear superseded logic in the proceeding months. 

3. A Sukkot Lesson on Schach and Being Comfortable with the Uncomfortable. While the pandemic has come with a lot of negative aspects, I did find myself growing spiritually. During the Jewish harvest festival of Sukkot, I looked at some of the architectural technicalities of the sukkah (temporary dwelling) and reflected on how to develop equanimity during tough times. 

4. The Smithsonian's Take on "White Culture" Begs the Question: When Does "Wokeness" Start to Resemble Racism? Martin Luther King, Jr. believed that we should judge people not by the color of their skin, but their content of their character. It's amazing how certain parts of society have devolved from that ideal. This past summer, the Smithsonian published an infographic outlining "whiteness" and "white culture" in an offensive form of stereotyping. I first delve into why over-generalizing an entire race is problematic, both factually and morally. Afterwards, I ponder where the line is between improving racial justice and becoming so obsessed with race that one's thoughts, words, and actions ressemble or parallel that of bona fide racists. 

5. Reflecting on My 1,000th Blog Entry and Why I'm Still a Libertarian, Pandemic or Not. Time flies when you are having fun, and my blogging has been no exception. It took over ten years, but I reached the milestone of writing 1,000 blog entries. I took the time to reflect on how I became libertarian. I then outlined the values-based (i.e., why I find it morally compelling) and outcomes-based reasons (i.e., why a look at empirical evidence led me to conclude that the private sector generally outperforms the public sector) as to why I adhere to libertarianism. I finally illustrate why a pandemic did not deter me from being libertarian, and if anything, why it strengthened my libertarianism. 

Shutting Down Gyms and Restaurants: Discussing Burden of Proof and COVID Risk Assessment with Limited Evidence

It has been a very trying year as we all get through this pandemic. After enduring a spring of lockdowns, establishments increasingly started to open. Navigating regulations and safety protocols has been difficult for many businesses as they struggle to comply while still generating enough necessary profits to remain in business. For those who have been in favor of lockdowns and a more restrictive approach generally, their mantra has been "Listen to the science!" We can get into whether the restrictionists are legitimately concerned about evidence-based practice or whether it is a guise to amass more power and control. I can say that I have expressed concerns about coronavirus-related restrictions not being empirically-based since I criticized the lockdowns last May. 

For those who thinks that being libertarian automatically means "have everything open during the pandemic," it really does not. For one, I called for a limited face mask mandate. I also was okay with a subsidy to pay for people to take the vaccine, provided that a) it is proven to be safe, and b) there is compelling case to be made to ensure that enough people will take it to create herd immunity. At the same time, I looked at the evidence for school closures in July and found it to be lacking. 

On the one hand, I am glad that many jurisdictions are treating the "shut things down" more like a dial than a switch. On the other hand, if a certain government entity is going to shut a certain type of establishment down, the burden of proof is on them to provide a conceivable set of facts that such a provision would protect the public health before disrupting the livelihood of hundreds. As the second wave has kicked in, we have seen two such establishments targeted either with more severe limits or downright shutdowns: restaurants and gyms. 

I want to see if the evidence out there merits shutting down either one or both types of establishments, but before jumping into that, a word on risk assessment in general. There is never going to be a scenario in which we eliminate risk. Why this pandemic brought about the delusion in many thinking we could is beyond me. As I will bring up again shortly, costs need to be weighed against their benefits. We know that contamination through surfaces is unlikely, and COVID-19 is most commonly spread by respiratory droplets. 

This has a few implications when assessing risk. One is that being outdoors is safer than being indoors because of how bacteria and viruses dilute and decay much more rapidly outdoors. The second is that social distance less likely spreads COVID-19 than being right next to someone else. The third is that larger gatherings are more likely to spread COVID-19 than smaller gatherings (and certainly smaller than being by oneself). There are more factors, but these are the main ones that help us determine the likelihood in which COVID-19 is transmitted to others. If I had to make an educated guess based on these factors, I would guess that gyms and indoor restaurants would fall somewhere on the range of "Medium Risk."

This side-conversation about restaurants and gyms is important since gyms and restaurants are more commonly indoors, not to mention that there can be multiple people together in what arguably could be construed as adequately close enough for major spreading. This gets even more important as winter weather kicks in, which means that outdoor gym classes or dining become less viable of options. Even if we did not have studies explicitly covering the specific topics at hand, we could at least see other past epidemiological studies to make an educated guess. However, since there are at least a few studies out there, I would like to see whether gyms and restaurants are such super-spreaders that we should be shutting them down as we get through this second wave. 

Are Gyms Major Spreaders of COVID-19?

Gyms did not exactly have a reputation of being a haven of sanitation pre-pandemic. At the same time, we already pointed out that COVID-19 is not commonly transmitted by other surfaces. Intuitively, whether gyms are super-spreaders largely depends on such factors as ability to space out the machines and treadmills, ventilation and airflow, face mask compliance, whether group classes are halted (see South Korea study here), local infection rate, and protocols on checking members for symptoms. As an epidemiologist from Arizona University, Saskia Popescu, put it, "it is hard to put them [all gyms] into a single box."

There was one study from MXMetrics based on 49 million gym check-ins that showed a 0.0023 percent likelihood of contracting COVID-19 from the gym, but it was commissioned by a sports club association. Another study that is to be released by Oregon University in the near future looked at gym usage in the state of Colorado. While they did not find a statistically significant correlation between weekly gym usage and weekly incidence of COVID-19, they also did not conclude that gyms are safe. At the end of its press release, Oregon University discussed safety procedures that it could use to minimize spread of COVID-19. Additionally, a November study coming from Norway found that provided there are good hygiene and physical distancing measures, gyms and training facilities do not provide additional risk (Helsingen et al., 2020).

What About Restaurants?

This is a good question, especially given scant data. An oft-cited CDC study is a limited study in Guangzhou, China saying that substandard ventilation is more likely to spread COVID-19, but that study had no scientific controls (Lu et al., 2020). There have been other similarly limited studies with similar results, but because they are so limited, it tells us next to nothing. Not many jurisdictions release such granular data. Even so, we do know, for example, that in New York State, 1.4 percent of cases were caused by restaurants and bars (compared to the 73.8 percent from private social gatherings). Similarly, the state of Minnesota found that since June, only 1.7 percent of COVID-19 cases were associated with restaurants.

One study I found helpful is from Stanford University, in which it shows that targeted efforts (e.g., capacity limits) are more effective than blanket closures (Chang et al., 2020).

Postscript

The limited evidence base that currently exists has not proven that gyms or restaurants are super-spreaders. How do we move forward? Do we err on the side of caution by shutting things down or do we allow restaurants and gyms stay open with such protocols as capacity limits, social distancing, and checking for symptoms before entering? I could ask how well lockdowns generally have worked (another discussion for another time), but I can say that restaurants and gyms across the country have been implementing protocols to make it safer, even if those vary from state to state or city to city. No activity is 100 percent free from risk, and that includes staying at home all the time.

Let's remember that when people solely focus on the risk for contracting COVID-19, they are only asking about one important part of the equation. I'm not here to diminish contracting COVID-19. I myself have already had it. At the same time, it does not paint the full picture. Extolling and playing up the benefits while ignoring or downplaying everything else is incomplete at the least, if not downright deceptive. It does not get into the benefits of keeping the establishments open (e.g., gyms keep people healthier) or the costs of keeping the businesses closed (e.g., how unemployment adversely affects finances or increases depression and suicidal ideation). Especially since we are almost a year into this pandemic, the government should show with evidence how keeping gyms and restaurants are harming public health before they needlessly go harming the livelihoods, and by extension, the quality of life, of thousands upon thousands of Americans.

Aside from each establishment having different levels of protocol, we each have our own level of risk. An 85-year-old with asthma is going to have a different risk tolerance than a healthy twenty-something. In the case of gyms, it is safe to assume that healthier people are going to the gym (especially now) than those who have conditions that could make them likelier candidates for contracting COVID-19. Even in a pandemic, we should not have one-size-fits-all solutions, but have the ability to voluntarily make our own decisions based on evidence and our own risks. 

7 Reasons Why the National Debt Still Matters (Even in a Pandemic)

For many, the year 2020 has been the worst year either in recent memory or in one's entire life. If the pandemic or recession were not enough, the United States government decided to accrue a ton of debt. Between March and October, the Treasury borrowed $3.5 trillion. Yes, that is trillion with a "t"! By the end of the calendar year, the debt-to-GDP ratio is expected to increase to 98 percent (Congressional Budget Office [CBO]). 

Tangentially, a school of thought that has gained more traction over time is Modern Monetary Theory (MMT), which essentially says that because the government has a de facto monopolistic power to create currency and bond investors have been lending at lower rates, the debt does not matter. Aside from being a departure from mainstream macroeconomics (as is exhibited by a survey of economists conducted by the University of Chicago showing that MMT is bollocks), MMT would have serious policy implications, mainly that one could continue to print currency until the end of time. A less extreme, more convincing argument than MMT is that in spite of the rising debt-to-GDP ratio, it is less costly [as a percentage of GDP] to service debt. 

Even if the debt servicing burden projects play out, there are still a number of reasons that we should still be worried about U.S. government debt:

1. Interest payments to go up from here. Part of what makes MMT so tenuous is that it assumes that interest rates (and by extension, the cost of burdening debt) stays low. According to the CBO's long-term projections, that is not expected to be the case. In the next decade, interest payments will increase from $376B in 2019 to $807B in 2029. In terms of percent of GDP, it is projected to be 2.2% in 2030 and 8.1% in 2050. There has been substantial academic literature to illustrate that there is a high correlation between rising debt and rising interest rates (Huntley, 2014).

2. Lower non-interest spending. If the government is spending more money servicing debt, that means less money on other public services (e.g., healthcare, education). Debt is the thing that holds back the ability to make better investments in the future. It also makes it more difficult to manage such future crises as wars, natural disasters, and recession (Romer and Romer, 2019).

3. Growing elderly population. As Baby Boomers retire, it will have an adverse effect on the debt, particularly when it comes to the worker-to-retiree ratio. This ratio is expected to decrease from 2.8 in 2020 to 2.2 in 2040. What happens when the elderly become a higher percentage of the population? For one, there will be fewer workers [as a percentage] contributing tax revenue dollars. This also means that there will be further strain on Medicare, Medicaid, and Social Security, which, by the way, are the largest drivers of the federal budget.

4. Increased U.S. public debt stymies economic growth. Based on 2019 projections, reducing debt would increase GNP per person by $5,500 in 30 years (CBO). Similarly, the International Monetary Fund [IMF] found that high debt hampers economic growth by "increasing uncertainty over future taxation, crowding out private investment, and weakening a country's resilience to shocks" (Gupta et al., 2015, p. 7).

5. Look at those trust funds! As a result of the pandemic, major trust funds are to go broke earlier than anticipated: Social Security in 2031, Medicare [Part A] in 2024, and the Social Security Disability Fund in 2026. This only serves to accelerate and exacerbate debt projections. 

6. Increased debt means lower savings and investment. A 2014 CBO paper found that an increase of $1 in the budget deficit translates into a reduction of national savings by 57 cents, as well as domestic investment by 33 cents. 

7. The U.S. debt trajectory. Shortly before the pandemic, the CBO predicted that debt-to-GDP ratio will be 180 percent by 2050. The United States was one of the few developed nations facing rising debt levels pre-pandemic. Thanks to pandemic fiscal spending, that ratio went up to 195 percent (CBO). There is no sign of it slowing down because unfunded liabilities, in this case, Medicare, Medicaid, and Social Security obligations that are not backed by assets. More to the point, economists at the Brookings Institution calculated that even if interest rates remain the same, the debt-to-GDP ratio would still increase to 156 percent (Auerbach et al., 2019). 

Postscript: Is the federal debt something so urgent that if we don't deal with it right this second, we're all going to die? Nope. At the same time, the increasing national debt is like a foundation of house slowly rotting. With an aging population and no sign of federal deficits slowing, it is only getting worse and collapse without reform. To quote the Government Accountability Office (GAO) in its March 2020 report, "the longer action is delayed, the more drastic the changes will be needed to address the issue."

For more information, see analysis from the bipartisan Committee for a Responsible Fiscal Budget here and here.

Do We Need Another Round of Stimulus Checks? I Think Not.

As we approach the expiration of various provisions in the CARES Act intended to help keep millions of Americans afloat during the recession, Congress proceeds with its bipartisan back-and-forth as to what should be in the next stimulus bill. One thing I noticed missing in this round of negotiations was the one-time $1,200 stimulus checks for individuals ($2,400 for married couples). This was unusual considering how much President Trump was clamoring for it earlier this year. Rather than delve into the politics, I prefer to examine the policy aspect.    

The premise behind a stimulus check is based in Keynesian economic theory. Essentially, the government sends its populace money. That money burns a hole in their pockets, so to speak. The increase in disposable income is sent to incentivize consumption, which in turn drives revenue increases at retailers, manufacturers, and other establishments. Ultimately, the stimulus checks are to translate into an economic boost. There was a secondary reason of keeping people isolated with the hopes that the pandemic would have short-term effects, but that clearly did not pan out. 

I could say there were some advantages to sending stimulus checks to people directly. One is that the process was relatively simple. If you as an individual made $75,000 or less in adjusted gross income in 2018, you received a check in the full amount. There were not income brackets or tax exemptions, which made the IRS' processing straightforward (even if imperfect). Second, because of its simple processing system, many people were able to receive the checks relatively quickly. Third, as the Peter G. Peterson Foundation mentions, the payments did go to those most financially hurt by the pandemic (see below). 

This brings me to the complaints I have about the stimulus check program. Some of those complaints are specific to the particular implementation of the last round of stimulus checks. I could complain that it was not well targeted, given the eligibility ceiling of $75,000. However, that could be rectified by changing the eligibility requirements to make sure that the funds reach those who need the money the most. 

Another complaint is with regards to improper payments. According to the Government Accountability Office (GAO), nearly $1.4 billion of those stimulus check payments (or 0.5 percent of the $292 billion spent) went to deceased individuals. The GAO discusses in its report how the IRS can improve the hypothetical next round of stimulus payments. 

My issues with the stimulus checks go beyond the implementation. As University of Chicago professor Constantine Yannelis points out, the stimulus checks do not distinguish between households and recipients, which means that it ends up being poorly targeted in terms of who needs it the most (unless you severely limited the eligibility requirements). The same thing happens with minimum wage. Because minimum wage is based on individual income (as opposed to household income), it helps out a disproportionately small percent of lower-income households. This phenomenon would explain why Yannelis calls the stimulus checks a blunt instrument. 

An even bigger point is this: if one of the main goals of stimulus checks is to spur consumption, what we should see is that most, if not all, of the stimulus payments went towards consumption. So how were the stimulus checks used? The Federal Reserve Bank of New York found that 25.9 percent of households used stimulus checks for consumer spending.

The biggest use of those stimulus checks were savings (36.4%), followed by paying off debts (34.5%). This means that the majority of the stimulus checks did not go towards consumption. A study from economists at the University of Texas, University of California-Berkley, and the University of Chicago had similar results (Coibion et al., 2020). Not only did these economists find that only 15 percent of households spend, those who did spend only used 40 percent of the check on average to spend. Those who were more likely to spend were those without work, lived in larger households, faced liquidity issues, and/or were less educated. 

This leads to the question of whether the consumption that did take place result in a boost in the economy. According to the Congressional Budget Office's September 2020 report on pandemic legislation, there was an annual percent change in GDP of 0.6 percent. At the same time, this was almost half of the effect that enhanced unemployment compensation had (see below). 

The fact that the stimulus checks fail at one of its most basic goals does not surprise me. I take a look at the Great Recession, the only other time in U.S. history where we really had this magnitude of stimulus checks, and see what happened. An economist at Stanford University not only found that the 2008 stimulus checks did little to boost aggregate demand, but also that consumption proceeded to decline in proceeding months (Taylor, 2018). Cash for Clunkers, which was a similar indirect transfer program during the Great Recession, shows similar failures in boosting long-term consumption (Hoekstra et al., 2014; Gayer and Parker, 2013).

And then there's the research on stimulus more generally. An economist at the University of California-San Diego investigated the effectiveness of government spending in response to recessions (Ramey, 2018). She concluded that the multiplier effect typically ranges between 0.6 and 1.0 (see graph below), or in layman's terms: government stimulus spending in response to recessions typically remains ineffective.  

Source: Heritage Foundation

To make the matter worse, a high debt-to-GDP ratio erodes the multiplier effect even further. This is important considering that the United States' debt-to-GDP ratio is expected to reach 98 by the end of the year (Congressional Budget Office). Some other countries have had a zero multiplier effect (e.g., Huidrom et al., 2019; Auerbach and Gordonichenko, 2012) where as some countries have been found to have had a negative multiplier effect (e.g., Ilzetzki et al., 2012). Why is this the case? Because when a country faces a high level of debt and spend a lot, a fiscal contraction is pending to compensate for managing the debts. Since such adjustments are anticipated, there have been times where the short-term consumption gets largely offset. Macroeconomically speaking, what we see is that government stimulus does not produce desired multiplier effects and that more specifically, stimulus checks do not produce the desired boom in consumption. 

Postscript

Thankfully, there is light at the end of the tunnel. The findings with the Pfizer and Moderna vaccines are quite encouraging. The United Kingdom already approved an emergency use authorization for the Pfizer vaccine. If all goes accordingly, it looks like we can start head back to normalcy around mid-2021. In the meantime, we have another six to seven months to go. We need something to hold us over in the meantime, and direct stimulus checks do not seem to do the trick. It is not simply for the multiple, aforementioned reasons. 

While there is a demand shock component to this recession, there is also a major supply shock element, which is contrary to past recessions that have primarily been due to demand-side shocks. Even assuming the shocks to supply and demand are equal, there is nothing that stimulus checks can do to mitigate the supply shock. To help with the supply shock, businesses need the equipment to operate safely. What else would help is widespread testing, which is something I have said since early April. Making sure that businesses have personal protective equipment and have the support to implement proper safety measures is what we need. I won't say that another round of stimulus checks is like flushing money down the toilet, but it is safe to say that there are better ways we could spend and target money to get through the rest of this ordeal.